House Republicans Are Trying to Re-Reform Welfare

Chairman of the House Ways and Means Committee Kevin Brady holds up a sample tax form as he speaks during a media briefing after the House Republican conference on Capitol Hill, April 17, 2018. (Joshua Roberts/Reuters)Their bill is ambitious — and risky.

The 1996 welfare reform worked in the simplest and most important way: It reduced poverty and the welfare caseload simultaneously. Former welfare recipients found that work was now far more attractive than welfare; they sought jobs, mostly successfully, in a booming turn-of-the-century economy, aided by work supports such as the earned-income tax credit.

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The actual program the law created, though, is a different story. Temporary Assistance for Needy Families, or TANF, has turned into something of a mess. And a bill the House Ways and Means Committee approved this week, the JOBS for Success Act, aims to fix it.

The bill is ambitious, and it addresses some problems with TANF that are recognized and bemoaned across the political spectrum. It’s also risky, as much of the new system it creates is a dramatic departure from the status quo. Conservative poverty experts’ reactions to the proposal have varied — I’m paraphrasing here — from “Could use a few tweaks” to “Hell, no.” And while the bill cleared the committee on a party-line GOP vote yesterday, the liberal Center on Budget and Policy Priorities had published an analysis the day before saying it “Makes Improvements But Doesn’t Go Far Enough,” suggesting there might be bipartisan possibilities.

The legislation presents both houses of Congress, and both parties, with a daunting choice: Work to pass a serious reform, a process that could involve extensive revisions to the bill and partisan mudslinging before an election, or just keep kicking the can down the road each year. If successful, the bill will be the first major update to TANF since 2005, and will rename the program “Jobs and Opportunity with Benefits and Services” (JOBS).

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The basic ideas behind TANF are sound. States administer their own welfare programs with block grants from the federal government. They have considerable latitude to decide how the money is spent, but they’re required to provide their own funds as well (called “maintenance of effort” because the required amounts are based on historical spending), to enforce work requirements, and to hit specific benchmarks in terms of making sure recipients are working or engaging in work-related activities.

Specifically, 50 percent of TANF families with a “work-eligible individual” must log a minimum number of hours per week (30 hours for most single parents, 20 hours for a single parent with a child under six, and so on), and there is a separate 90 percent requirement for two-parent families (who face a 35-hour requirement, or 55 hours if they use federally funded child care). If a state fails to meet these “work-participation rates,” it faces funding cuts.

The JOBS for Success Act completely revamps the way states are held to account for getting recipients into work, and how the grants are managed as well, while leaving the program’s overall funding level the same.

The problem is that states have proven adept at gaming the requirements and exploiting various technical loopholes in the law. States with falling caseloads get a “caseload-reduction credit” that eats away at the aforementioned 50 percent benchmark, as well as a credit for spending more than required for “maintenance of effort”; many states reduce their goal all the way to 0 percent. Credits also reduce the 90 percent threshold for two-parent households, but the initial goal is so unrealistic that some states have simply used their own money to deal with these cases so they don’t have to meet it. And the block grants have proven a bit too generous in terms of discretion, enabling states to funnel the money to uses that might be worthy — such as child-welfare services and even college scholarships — but are not really within the scope of what TANF is supposed to do. To top it all off, the grants are not adjusted for inflation and therefore erode with time.

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Enter the JOBS for Success Act. It completely revamps the way states are held to account for getting recipients into work, and how the grants are managed as well, while leaving the program’s overall funding level the same.

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The most controversial change is that the 50 and 90 percent work-participation rates are simply eliminated, replaced with two new policies to encourage work. First, states will need to engage all work-eligible families with individual case management — including a set of goals and expectations for each — and all of those families will need to meet the minimum hourly requirements or face sanctions. And second, there will be a new accountability system measuring results, including employment and earnings, after recipients leave the program.

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Both of these reforms have their potential downsides. The universal work requirement, for example, comes with a liberalization of what counts as a work-related activity. Previously, recipients had to focus on “core” work activities (e.g., on-the-job training, subsidized work, or normal employment) and could use “non-core” activities (education, other training) to meet only part of their requirements; that distinction is gone in the bill. Two new entries on the list, apprenticeship and career technical education, are added as well.

Angela Rachidi, a poverty-studies fellow at the American Enterprise Institute, is open to relaxing the core/non-core distinction but skeptical of eliminating it in one fell swoop. “The original law was based on an understanding of research from the prior decade, which suggested that the quick labor-market approach was better than the education approach,” she says. But based on her time administering welfare programs in New York City, she adds, “I agree with some of the states that say the distinction can take away from what is ultimately the main goal, which is to get people into employment. I wouldn’t say I’m 100 percent behind getting rid of it entirely, but it’s time to start testing out other approaches.”

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Another significant fact: Beyond the work-related activities laid out in federal law, the bill allows states to count “any other activity that the State determines is necessary to improve the employment, earnings, or other [relevant] outcomes of a recipient” — discretion that states might abuse, unless held in check by the secretary of health and human services (who would approve state plans every two years). Before the 2005 TANF update cracked down on such practices, some states interpreted the federal list of work activities rather broadly, as highlighted in a Government Accountability Office report from that year. The more ridiculous examples of qualified activities included bed rest, personal journaling, exercise, reading at home, and helping friends and relatives with errands.

As for the new accountability system focused on employment after leaving the program, Heather Hahn of the Urban Institute laid out some of the unavoidable tradeoffs in a post earlier this month: It would give states an incentive to prepare people for work, to keep people on welfare if they were unlikely to find jobs, and to avoid serving people to begin with if they had strong barriers to employment.

Taken as a whole, the legislation has provoked a mixed reaction on the right.

In addition, federal law would not lay out specific benchmarks for states to hit; instead, states would negotiate their benchmarks with the executive branch — which, while various general guidelines are provided, would have to develop a fair and objective way to handle these negotiations with all 50 states. If states did fail to meet their benchmarks, however, they would lose some funding, the same way they do now if they fail to hit their work-participation rates.

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Somewhat less controversially — at least among policy analysts, as opposed to states that might not want their federal largesse choked off — the bill also overhauls the way block grants are handled. Funds would be limited to use on families below 200 percent of the federal poverty level, and there would be new limits on states’ diverting money to other uses.

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Taken as a whole, the legislation has provoked a mixed reaction on the right. On the American Enterprise Institute’s website, Rachidi offered a balanced assessment of the initial discussion draft of the bill, noting “positive changes” and “areas of concern.” In general, Rachidi wishes the bill included more experimentation, such as through demonstration projects, rather than imposing a new system that hasn’t been fully tested. Ways and Means Committee communications director Julia Slingsby, though, counters via email that “with a booming economy, thanks in large part to tax reform, people on the sidelines deserve action now.” She adds that the bill’s approach to job preparation is similar to that used in the Workforce Innovation and Opportunity Act, and that “states like Texas are already doing this and were our guides.”

By contrast, Robert Rector of the Heritage Foundation, an author of the 1996 welfare reform, tells me the bill is “not as bad as what Obama did” — referring to a 2012 executive action, since rescinded by Trump, that tried to undermine TANF’s work requirements — “but it does have eerie similarities.”

Rector notes that there are two different senses of the term “workfare” — one in which welfare recipients are asked to work in exchange for their benefits, thereby making welfare itself less attractive to those with other options; and another in which “what you’re trying to do is bring people into the welfare system, give them training and services, spiff them up, and spit them out as highly employable individuals. That is a farce, and it’s been a farce since I was first involved in this issue, which goes back to the Carter administration.” He sees the “work first” approach as the very key to the success of the previous round of welfare reform, and the bill as an abandonment of that principle.

Congress can simply maintain a program that everyone agrees is flawed. Or they can play the high-stakes game of trying to re-reform welfare without jeopardizing the progress they made the last time around.

Rector is unsure that the “universal engagement” provision will be effective, since states will no longer lose funding if they fail to get recipients to work while receiving benefits, and sees the post-welfare outcome measures as a recipe for gaming and confusion. States might be able to cycle highly employable individuals through the program to boost post-welfare work rates, for example — though the state-negotiated targets are, in theory, supposed to take beneficiaries’ characteristics into account — and he points out that many who leave TANF do so under hazy circumstances that can involve unreported and therefore untrackable income. As for giving the secretary of health and human services the authority to veto state plans that cross the line into absurdity, “The assumption is that you’re not going to have an Obama-like secretary in future, which is not true. You need to nail the standards down as tightly in the law as you can.”

It’s also worth noting that the JOBS for Success Act differs markedly from the approach to TANF’s work requirements laid out in the president’s current budget (see page 105 here), despite sharing the same basic goals. The White House suggests combining the two work-participation rates so that two-parent families aren’t treated differently, giving states partial credit for recipients who work but fall short of their required number of hours, and changing the caseload-reduction credit into an “employment credit” that would benefit states only if they got former recipients into jobs. These changes would strengthen the current system rather than replacing it with something else entirely.

Like I said, Congress faces a daunting choice. They can simply maintain a program that everyone agrees is flawed. Or they can play the high-stakes game of trying to re-reform welfare without jeopardizing the progress they made the last time around.

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